Operational Due Diligence

Our solution

During the pre-acquisition period, the investor has limited access to the staff in the target company. Exchanges are biased during the phase of ” seduction ”.
Fontenay proposes an organizational audit for mapping the risks of the company, its weaknesses and points of vigilance in view of achieving the future Business Plan (BP).
This diagnosis is led by a team combining operational and investment experiences. It evaluates the concrete organizational challenges.
Investors will then be in a stronger position to finalize their negotiations and effectively define the main areas of development and improvement, based on an operational 360 ° vision.

Case study

Base line

Two financial investors plan to accompany one of the managers of an automotive supplier who wants to take over a one of the businesses of the group. This tier 2 business owns two industrial sites, one in France and the other one in Eastern Europe. It employs around 200 people and is profitable.

Its sales to the rest of the group are very small. At operational level, it has already a significant degree of autonomy, although some management and support services are still provided by the Group.
Before the closing, after the usual audits have been carried out, the financial investors wish to get an analysis of the operational situation of the company. Two main questions are raised:
Two financial investors plan to accompany one of the managers of an automotive supplier who wants to take over a subsidiary with a specific activity. This tier 2 activity involves two industrial sites, one in France and the other in Eastern Europe. It employs around 200 people, is profitable and only realizes a very limited share of its turnover with the rest of the group. At the operational level, the target has already a degree of autonomy, although some management and support services are still provided by the Group.
Before the closing, after the usual audits have been carried out, the financial investors wish to have an analysis of the operational situation of the company

Two questions are raised :

• Is the supply chain functionally robust?
• Are the sales organization and the management structure able to take over smoothly?

The offer of Fontenay Operating Partner

A flash analysis is conducted in one week by a partner of Fontenay Operating Partner. He visits both sites, interviews managers and key staff and investigate the production line in detail. His report provides investors with an overview of strengths and weaknesses.It outlines the following features:

• The means of the company are sufficient to drive its development independantly
• It also has a good potential, both because of its market positioning and the existence of two well-located sites
• The next twelve months should be devoted to strengthening the supply chain with two priorities, stricter application of processes and improvement of quality on the French site and measurement of the costs of products phase by phase on both sites.

The success of these actions will significantly increase the outcome of the new group. It will have a beneficial side effect: reinforce the cohesion between the two sites and thus create a team spirit in the group.

Results

Fontenay Operating Partner recommends investors to enter the capital of the company and suggest to the leader to focus on the operational optimization during the first year. This advice has been followed and today the group has become European leader on its market. It has turned a business that was previously usually integrated in major equipment manufacturers, into a recognized speciality operating with its own standards, with a strong growth potential.